7 important lessons to catapult growth in your professional services business #4
One of the common denominators we’ve found most professional service firms are struggling with is they’re attempting to recover from poor performance and desperately want to take their business to the next level.
And we empathize with you. Owning, running, and growing your firm when facing these odds is hard.
We’re going to share seven secrets to help you overcome these similar struggles.
1) Focus on your core competencies. Your core competency should be your focus. Many companies stray off course from selling their primary revenue generating products and services. They’ve lost their focus, wasted too much time and money, and are weakened and confused. Instead of chasing the shiny object, stay focused on what you’re good at while offering your primary revenue generating products and services.
2) Profit. Many of the companies we talk with are so focused on revenue they completely ignore the main reason for the existence of a business: profit. They’ve lost the proper perspective. Many businesses with respectable revenue are losing money hand over fist because they don’t have a plan for profitability. Businesses can’t spend revenue and this should never be the expectation. You should have a plan for profitability through a well laid out growth initiative.
3) Know your numbers. There are three numbers that every business owner should know.
- Your annual sales revenue based on a trailing 12 months, not the calendar.
- Your gross profit margins.
- Your expenses as a percentage of your gross profit, not a percentage of your sales because you pay your bills with gross profit, not with revenue.
Most professional service owners don’t know the basic metrics of their business, such as sales per employee, cost of goods, the cost of acquiring new customers, margins on service lines, products, etc. Get to know them because knowing this will help you grow and better manager your company.
4) Cash flow. This is extremely critical and ties into the above point related to knowing your numbers. Many companies are stretched to the limit with available cash to run their businesses and are often over leveraged. A business cannot sustain itself without having healthy cash flow, which is then reported by knowing your three numbers.
5) Check your ego. Many entrepreneurs have poured their heart and soul into their business making it hard not to see through the trees in the forest. It’s easy to become blinded to ideas that could help your business become healthier. At some point you’re going to have to give up some of the control to the people you’ve entrusted to help you run the business. It’s hard, we get it. But letting go of your ego is one of the critical aspects of setting the stage for growth and profitability.
6) Right seats on the bus. To quote the great Jim Collins, you need to have the right team members in the right seats on your bus. We’ve seen many situations where the companies we’ve worked with had excellent employees. These employees were doing great things but they were doing the wrong things. They were given responsibilities far beyond their skill sets and abilities and often hired because they were friends or family members. As a business owner, you need to be objective and tough when it comes to determining whether or not you have the right team members in the right positions. While business is always personal, the paychecks of all your employees are relying on you to make good decisions like getting everyone in the right positions on your bus.
7) Sales and Marketing. Entrepreneurs often have a build-it-and-they-will-come-attitude. They have this innate quality of believing that their better mousetrap will drive the world to their door. What they fail to factor is how difficult it is to generate and acquire new customers and how much time and money this will take. Just because you know your product or service and are passionate about it doesn’t mean your prospects will have the same convictions to buy what you’re selling.
Let’s talk
These seven nuggets of wisdom are things we help professional service firms overcome each and every day.
But it’s not only about the nuggets of wisdom for us. It’s about your success through an M&A and growth strategy initiative that’s designed with you in mind.
To talk with us about how we can help your business navigate the tricky waters of M&A and growth, email here us to schedule some time to talk.